Banks honor promises on racial equity, but where are the new home loans?

After the killing of George Floyd three years ago, banks across the country pledged billions of dollars to help rectify the stark economic inequalities faced by Black Americans and the entire Black, Indigenous, and people of color (BIPOC) community.

As we approach the Juneteenth holiday, we took a deep dive to find out if the country’s five largest commercial banks have kept their promises aimed at addressing financial racial inequities.

We found many of the country’s largest banks have made progress on their promises to invest in Black and Brown communities, however, these banks are struggling to meet their commitments to promote home ownership.

Equal access to homeownership matters because it is a crucial tool for family building, community ownership, and wealth creation. Sadly, the Black-White homeownership gap is the largest it’s been in a decade and Black borrowers remain locked out of owning their own homes, even compared to comparable white borrowers. Until this gap is closed, disparities in racial wealth will continue to grow.

What we looked at

Since 2020, banks have enthusiastically reported on progress made toward their racial equity goals, but levels of transparency have varied, making it difficult for the average person to assess if and how promises have been kept. Of the five biggest commercial banks, two have so far conducted audits of their racial equality programs.

To create a snapshot of progress made to date, we looked at the reporting of the 5 biggest commercial banks — JP Morgan Chase, Citigroup, Bank of America, Wells Fargo, and U.S. Bank — between 2020 and 2022, along with the latest Home Mortgage Disclosure Act (HMDA) data (through 2021).

We looked at the progress made on promises made and reaffirmed in 2020, with an emphasis on new home loans.

What we found

• There appears to be genuine impetus from the big 5 commercial banks to address formerly entrenched racial inequities.
• Commitments to new home loans for Black and minority households have, on average, not been fulfilled by the big 5 commercial banks.

Progress on all investments promised

On a high level, all banks except Wells Fargo appear on target to meet their total financial target.

Key takeaways

• JP Morgan Chase, Citigroup, and Bank of America are on track to accomplish their total racial equity investment targets by their respective deadlines.
• Wells Fargo appears unlikely to meet its total racial equity investment target by 2027.
• U.S. Bank has exceeded its total racial equity investment target to date.

Progress on promised home loans

The progress made on home loans targeted at minority and low-income households is less optimistic, with only one bank, Bank of America, reporting significant progress since 2019.

• JP Morgan Chase and Citigroup made specific promises in 2020 to underwrite new loans, but neither had made material progress at the end of 2022.
• JP Morgan Chase issued fewer loans annually in 2021 and 2022 to Black, Indigenous, and People of Color (BIPOC) households than it did in 2019.
• Citigroup is yet to issue $350M in home loans pledged in 2020 and is unlikely to do so prior to its self-imposed deadline of 2023.
• Wells Fargo made an ambitious promise of $15B in 2017 to create 250,000 new Black homeowners but issued 41.83% fewer home purchase loans to Black households in 2021 than in 2019.
• Bank of America has bucked the trend and has issued 24,000 home loans to multicultural families since 2019.

JP Morgan Chase

In October 2020 JP Morgan Chase announced a 5-year, $30 billion Racial Equity Commitment intended to “help close the racial wealth gap among Black, Hispanic and Latino communities.” The commitment included loans, equity, and direct funding toward affordable housing, home ownership, small business, financial health, and access to banking.

Progress to date

In November 2022, JP Morgan Chase released the results of a third-party audit, conducted by Pricewaterhouse Coopers, on progress toward the bank’s Racial Equity Commitment as of year-end 2021.

To date, no third-party audit of the bank’s 2022 progress has been released. The following data is based on JP Morgan Chase’s 2022 Environmental Social Governance Report (ESG).

Key Takeaways

• By the end of 2022, JP Morgan Chase had come close to its total 5-year goal of investing 30B ($28.9B at year end).
• Overall, the bank is on track to meet or exceed most of its 5-year goals.
• The exception to this is in regards to new home loans for BIPOC households and small business loans in majority-BIPOC communities. In both of these areas, the bank decreased its investment compared to the 2019 baseline.
• The bulk (84%) of the total dollar amount invested was in low-income housing.
• In its 2022 audit report cover letter, JP Morgan Chase acknowledged this fact, stating that progress toward it’s $30B goal has been “largely driven by homeownership refinancing and affordable rental housing preservation — areas where the firm could take prompt action to help customers save money on their mortgages while rates were low and help preserve affordability while rents were rapidly rising.”

Housing

JP Morgan Chase’s initial commitment included a relatively even amount of money invested in both home ownership and affordable rental housing, with $15B committed toward rental housing and $12B toward home ownership ($8B for new home loans and $4B for refinancing of existing loans).

As of year-end 2022, JP Morgan Chase has exceeded its goal for investments made toward affordable housing, and it is nearing its goal for refinancing of existing home loans, but it has not yet made significant progress toward it’s goal of originating a greater amount of new home loans for BIPOC households.

The bank has fulfilled 9.56% of its $8B goal toward new home loans, but it has originated 2,673 fewer loans compared to its 2019 baseline.

Malcolm-Wiley Floyd, CEO of Stairs Financial commented, “Chase has created and marketed several programs targeting affordable lending, so it’s disappointing to see them fall short of their goal for new home loan origination. The Chase Homebuyer grant pays up to $5,000 in down payment assistance and their DreaMaker mortgage comes with a 3% minimum down payment and flexible underwriting.”

Citigroup

In September 2020, Citigroup committed $1.15B to help close the racial wealth gap. The commitment included specific amounts to be invested in homeownership, procurement, impact capital, support for Minority Depository Institutions (MDIs), and grants.

Progress to date

In December 2022, an independent audit on Citi’s progress toward its racial equity goals was issued by Covington. The following data is based on this audit.

Key Takeaways

• Citigroup is on track to meet its overarching financial goal but is lagging in areas of impact investment, community change, and loans.
• Almost half of Citigroup’s achievement can be allocated to its procurement choices, spending $497M with Black-owned businesses, 47% more than targeted.
• Investment in MDIs has surpassed the initial commitment, with $37M invested beyond the initial commitment of $100M, an additional 37%.
• Investment in new home loans is behind schedule, with $350M yet to be invested in low-down payment loans. The auditor notes that “the mortgage market could present challenges to Citi’s ability to meet this goal by the end of 2023.”

Housing

One of Citi’s largest commitments from 2020 was $550M to grow homeownership among minorities. This consisted of two parts: 1) $200M of equity and preferential financing to support homeownership through affordable and workforce housing projects led by minority developers and 2) $350M in investments.

According to the 2022 audit, Citi has successfully invested $200M in minority developers but is yet to make its additional $350M in housing investments. As far as we can tell, it will be dispersed as loans to people of color through its recently expanded “Home Run program and LPA” products. The HomeRun program comes with a minimum 3% downpayment and no mortgage insurance requirement. According to the 2022 audit, the investment is progressing but is unlikely to meet the 2023 deadline set by Citi.

To help judge Citi’s progress on writing new loans (excluding refinancing) to minorities since its 2020 pledge, we looked at the most recent HMDA data of home purchase loans. Between 2019 and 2021, Citi actually reduced the number of home purchase loans it originated for Black households by 35.53% and for Hispanic or Latino households by 33.94%.

Malcolm-Wiley Floyd, CEO of Stairs Financial, commented: “Citigroup has laid the groundwork for its $350M investment in home loans for Black and Brown families by hiring community lending officers and expanding the HomeRun program, increasing down payment and closing cost grants to $7,500. That said, their existing efforts haven’t produced an increase in origination to BIPOC borrowers according to HMDA data.”

Bank of America

In June 2020, Bank of America pledged $1B of additional support over 4 years to help “local communities address economic and racial inequality accelerated by a global pandemic.” This commitment focused on four areas, Health; Jobs/Training/Reskilling/Upskilling; Support to Small Businesses; and Housing.

At the same time, Bank of America reaffirmed its $5B program to promote homeownership: the Bank of America Community Home Ownership Commitment. Later, in 2021, they tripled their commitment to $15B.

In March 2021, in reaction to attacks and hate speech targeted at Asians, Bank of America increased its June 2020 commitment to address racial justice to $1.25 over 5 years. This took the bank’s total racial equity commitment to $16.25B by 2025.

Progress to date

Bank of America is yet to provide a third-party assessment of its activities and won’t until 2024. In lieu of this, we assessed Bank of America’s progress toward its commitments by reviewing Bank of America’s annual reports and proxy statements, then cross-verified where possible with third-party sources.

Key takeaways

• Bank of America has originated 36,000 home loans worth more $9.5 billion as of Q3 2022, and is on target to meet its 2025 target.
• Bank of America appears on track to meet its overarching target of $1.25B by June 2025, having committed $671M already.
• The second largest item ($421M) has been investments to funds focused on minority entrepreneurs.
• The third biggest spending area ($143M) is low-cost deposit programs and capital investments in MDIs and CDMIs.
• Investments in Jobs/Training/Reskilling/Upskilling and Health were made as well, but the amount is unspecified.

Housing

Bank of America reports that as of August 2022, 36,000 people and families have leveraged their Community Home Ownership commitment to buy homes, utilizing more than $9.5B in low down payment loans and over $350M in non-repayable down payment and/or closing cost grants. Two-thirds of recipients are identified as “multicultural”, but the number of individuals/families of particular races or communities isn’t identified.

Bank of America’s Down Payment Grant and America’s Home Grant programs provide borrowers (of any race) with up to $17,500 in down payment and closing costs assistance.

In August 2022, as part of its Community Home Ownership Commitment, Bank of America released a new loan (Community Affordable Loan Solution™) which includes a bank-provided down payment and no closing costs. The loan is Bank of America’s first product targets historically Black/African American and/or Hispanic-Latino neighborhoods, including neighborhoods in Charlotte, Dallas, Detroit, Los Angeles, and Miami.

When we look at the latest HMDA data (2019 — 2021), there is an upward trend in home purchase loans issued by Bank of America for Black households, rising by 15.03%. However, during the same period, loans originated to Hispanic or Latino households only rose by 0.72%

Malcolm-Wiley Floyd, CEO of Stairs Financial, commented, “Bank of America has made a strong commitment across several programs and initiatives to address the racial wealth gap, and it’s encouraging to see growth in Black loans originated. It’s puzzling that the gains haven’t translated to the Latino community, but I’m hopeful that their new initiatives, including their new special purpose credit program, will be more successful.”

Wells Fargo

In 2020, Wells Fargo made a series of commitments related to racial equity and diversity. In March, the bank committed to investing $50M in MDIs. In June, Wells Fargo committed to increasing internal diversity efforts, and then in July it granted $13.5M to the Expanding Black Business Credit Initiative.

Wells Fargo also reaffirmed its 2017 commitment to investing $60B in the creation of 250,000 Black homeowners by 2027.

Progress to date

Wells Fargo has not conducted a transparent audit of its 2020 commitments (but plans to in the future). To get a feel for the bank’s progress, we looked at annual reports, proxy statements, and Wells Fargo’s 2021 Diversity, Equity, and Inclusion report.

Key Takeaways

• Wells Fargo is likely to be lagging behind on its $60B commitment to create 250,000 new Black homeowners by 2027.
• The bank’s largest completed initiative was $50M in equity investment in Black-owned MDIs
• The bank completed its $13.5M grant to the Expanding Black Business Fund, aimed at growing Black entrepreneurship.
• Wells Fargo reports having made progress on its internal initiatives, in particular growing diversity amongst its executives. However, reports in 2022 about fake interviews for the sake of diversity targets throw a shadow over these reported achievements.
• The bank was halfway to doubling its Black leadership when it last reported on diversity in 2021, growing Black leadership from 6% to 8.9%.

Housing

In 2017 Wells Fargo committed $60B to creating at least 250,000 new Black homeowners by 2027. However, Wells Fargo has not reported since its 2017 annual report, signaling that the promise may have lost traction in the face of difficult market conditions.

Based on Bloomberg analysis, it appears Wells Fargo has backed successively fewer loans for Black households in the period 2017 to 2021, hitting a 15-year low in 2021. This suggests that Wells Fargo has not only fallen short of its goal for new Black homeowners, but it has also gone backward relative to the 2017 baseline.

This is in part confirmed by the latest HMDA data which shows the number of home purchase loans issued to Black households fell between 2019 and 2021 by 41.83%. In the same period, loans to Hispanic or Latinos also fell by 41.48%.

Despite these results, Wells Fargo hasn’t given up, as evidenced by recent initiatives.

In Jan 2023, Wells Fargo announced changes to its home-lending business, with an increased focus on minority home buyers. Details are limited, but the bank plans to expand its existing Special Purpose Credit Program, invest in partnerships with non-profit organizations and in community engagement, and deploy more mortgage consultants in minority communities.

In April 2023, the Wells Fargo Foundation launched a new $60m initiative, Wealth Opportunities Realized Through Homeownership (WORTH), to create 40,000 new homeowners of color by 2025.

Most recently, in June 2023, Wells Fargo and the Latino civil rights group UnidosUS announced a $100M plan to help four million Latinos buy homes by 2030.

Malcolm-Wiley Floyd, CEO of Stairs Financial, commented, “These last few years have seen Wells Fargo rededicate themselves to serving the BIPOC community, but it’s been an up and down ride, including accusations about underwriting standards being prejudiced against Black neighborhoods. As evidenced by the HDMA new purchase loan data, their efforts have been focused more on refinancing existing loans than on creating new BIPOC homeowners. However, we recognize that Wells Fargo’s commitment to Black home buyers was the largest in dollar amount of the banks we studied, and we look forward to seeing them succeed in the future.”

U.S. Bank

In June 2020, U.S. Bank committed $17M plus $100M annually to address social and economic inequality. The pledge included a grant to help rebuild communities, plans to partner with Community Development Financial Institutions (CDFIs), and $100M to be invested annually in Black-led or owned businesses.

In June 2021, U.S. Bank grew these commitments further and added investments for Black homeownership and businesses owned by women of color.

Progress to date

U.S. Bank has not committed to an independent audit of its racial equity promises and subsequent progress. To assess how far the bank has come in achieving its pledges, we reviewed U.S. Bank’s press releases, annual reports, and proxy statements.

Key Takeaways

• U.S. Bank appears to have met its overarching financial commitments to date (with an ongoing requirement of investing $100,000 each subsequent year).
• The largest commitment made by U.S. Bank was $300M in capital through 2022 to invest in black-owned or black-led businesses. The bank surpassed this goal by $321M.
• The bank delivered $550,000 in grants to housing developers of color.
• U.S. Bank invested $10M in the first CDFI-issued racial equity bond, aimed at providing targeted investments in underserved communities of color.
• U.S. Bank reports that it has honored its pledge of $15M for a fund to rebuild communities damaged by civil unrest and to address systemic economic and racial inequities.
• U.S. Bank committed $3 million to education and outreach for homeownership education and opportunities but is yet to report what’s been invested to date.

Housing

U.S. Bank pledged a $3M investment through 2025 focused on homeownership education and opportunities, starting with Black communities. The bank reports $1.6 million will be invested to support outreach, engagement, and educational efforts in Las Vegas, Little Rock, Milwaukee, Minneapolis, St. Louis, and nationally with Fannie Mae and Freddie Mac. The destination of the other $1.4M is unclear.

Alongside this pledge, USB reports investing more than $989 million in Low Income Housing Tax Credit (LIHTC) equity and more than $951 million in affordable housing lending in 2021. This investment is reported to have funded 28,486 affordable housing units across the nation, but the proportion of BIPOC households is unclear.

The latest HMDA figures also show a positive trend with U.S. Bank issuing more home purchase loans to Black households in 2021 than it did in 2019, with the total rising by 25.79%. Likewise, the volume of home purchase loans issued to Hispanic or Latino households rose by 21.42% in the same period.

Malcolm-Wiley Floyd, CEO of Stairs Financial, commented, “US Bank’s commitments were relatively small compared to this peer group, but they deserve credit for meeting most of them, and for increasing their share of Black and Brown home purchase loans in recent years. I hope that their progress encourages more investment in the years to come.”

Additional commentary

In summary, Malcolm-Wilery Floyd, CEO of Stairs Financial, commented:

“In our research, we found a wide range of funds allocated to financial social equity and new, exciting programs created. Banks have made new loan programs for first-time home buyers, have added affordable lending options, and created new special-purpose credit programs to target the most affected borrowers. We also know many lenders and loan officers who are committed to community outreach and spreading the word about these new opportunities in the BIPOC community.

However, lenders are still falling short of their own stated goals in promoting home ownership, specifically in new home lending. Macroeconomic trends like rising interest rates, low housing supply, inflation, and low wage growth contribute to the problem.

The shortfall in loans committed, as seen in our research, suggests also that banks are having a hard time reaching BIPOC borrowers. Existing methods of marketing home loan opportunities might not be enough to address the racial housing gap.

As all home lenders look to play their part in promoting Black home ownership, we hope that they will expand their efforts to meet their stated commitments, and further increase the investment in programs and initiatives to help more Black and Brown families buy homes.”

Methodology

To establish achievements made, we reviewed press releases, annual reports, proxy statements, and current marketing materials from all five banks. Where possible, we also reviewed independent audit reports. We also used 3rd party sources (referenced) for additional information.

The HMDA data quoted relates only to home purchase loans issued and does not include other types of loans such as refinancing, home improvement, or cash-out refinancing.

Data gathering and review took place between 22 May and 6 June 2023.

Disclaimer

This article is for informational purposes only and should not be considered as legal or financial advice. Please consult an attorney, mortgage lender, or CPA for guidance on your specific situation.

All efforts have been made to objectively cover the initiatives taken by the banks reviewed and to ensure the accuracy of the data presented. We cannot guarantee that all relevant promises and programs have been included in this article or that all facts and figures reported are correct.

Update June 15th: Reference added to Wells Fargo’s newest housing initiative.